The Homebuying Process Explained
BY THE PERK LENDING TEAM | July 15, 2023 | 3-minute read
The process of buying a home can seem overwhelming if you are a first-time homebuyer. Fortunately, an experienced loan officer and realtor can guide you through the process.
Decide If You Are Ready
Before you begin walking through open houses, it’s a good idea to assess if becoming a homeowner is right for you. Here are some questions you’ll want to ask yourself:
Are you planning on living in the area for at least 5 years?
Can you afford the monthly mortgage payment if one of the buying parties can’t?
Can you afford the monthly mortgage payment after significant life changes? (Change or loss of employment, having a child, etc.)
Are you ready for the responsibility?
Getting Pre-Approved
Once you’ve decided homeownership is right for you, you should get fully pre-approved. Pre-approval involves submitting all required preliminary documentation to the lender before house hunting. The lender will then issue you a letter stating your eligibility for a specified loan amount and product.
We highly recommend pre-approval for all our clients. Pre-approval will tell you your all-in budget, streamline the loan process, and put you in a much better position when making an offer on a home. Realtors can leverage your pre-approval status to sellers, making you more competitive with cash buyers.
Make an Offer on a Home
After getting pre-approved, it’s time to house hunt. You will be working with your realtor in this stage who will structure an offer. If your offer is accepted, you will sign a purchase agreement and typically submit your earnest money deposit.
Earnest money is a cash deposit made to secure your offer on the home and show you’re a serious buyer. This deposit amount varies so it’s a good idea to speak with your realtor ahead of time about how large the earnest money deposit is likely to be. Be ready to write a check when you make an offer — especially if you’re buying in a competitive market.
Complete the Mortgage Process
After your offer has been accepted by the seller, the remaining pieces to close on your new home get underway. You may be asked for additional financial documentation and will receive the Loan Estimate detailing an estimate of costs and fees associated with the mortgage. A home inspection and appraisal will then be completed and all documentation will be sent to the underwriter for final approval. If you were not pre-approved, the mortgage process will take longer.
Close on Your Home
You’ve made it to closing! Prepare yourself for a large stack of paperwork to sign. One of the most important documents you’ll be signing is the Closing Disclosure.
Contrary to the Loan Estimate, the Closing Disclosure lists the final costs associated with the mortgage. Regulations dictate how much costs on the two documents can differ, so they shouldn’t differ substantially. Regardless, your loan officer may advise you to bring the Loan Estimate when signing the Closing Disclosure for comparison.
Both you and the seller will be signing documents to transfer title. You’ll sign all your mortgage documents, receive your keys, and just like that – you are officially a homeowner. If you are ready to get started, you can fill out an application to begin.
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